The dollar's latest gains have renewed concerns over their impact on consumer prices, particularly for import-dependent sectors. However, banking analysts and industry representatives told Ahram Online that while a prolonged rise in the US currency could increase production costs in some industries, Egypt is better positioned than it was during the inflation crisis of 2023 and 2024.
The depreciation of the local currency comes in the wake of the renewed clashes over the past few days in the Middle East over the closure of the Strait of Hormuz.
Their assessment aligns with recent views from international financial institutions. The International Monetary Fund (IMF) has credited Egypt's flexible exchange rate regime with strengthening macroeconomic stability, easing inflationary pressures, and improving the country's external position. The fund emphasized that allowing the exchange rate to respond to market forces remains key to absorbing external shocks.
Fitch Ratings also expects inflation to continue moderating through 2026, moving closer to the Central Bank of Egypt's target range.
Dollar reflects market fundamentals, not a currency crisis
Banking expert Walid Adel told Ahram Online that the dollar's recent appreciation reflects a combination of higher demand from importers, scheduled external payments, shifts in foreign investor appetite for emerging-market debt, and periods of broader strength in the US currency.
"The exchange rate is now responding to market forces rather than administrative controls," Adel said, adding that movements in either direction are a normal feature of a flexible exchange rate regime.
He stressed that the current exchange rate should not be viewed in isolation, saying the key indicators are the sustainability of foreign currency inflows from tourism, remittances, exports, and foreign investment, as well as the level of international reserves and foreign investment in Egypt's local debt market.
According to Adel, the impact of exchange rate movements on inflation has become less pronounced than in previous years because foreign currency shortages have eased and import and customs clearance bottlenecks have largely disappeared.
He said companies are also better positioned to absorb temporary increases in import costs through inventories and profit margins before passing them on to consumers.
While a sustained appreciation of the dollar, particularly alongside higher global energy and commodity prices, could generate limited inflationary pressures, Adel ruled out a repeat of the sharp inflation episodes experienced in 2023 and 2024, citing improved foreign exchange availability, tighter monetary policy, and greater market resilience.
He expected the sectors most exposed to a prolonged rise in the dollar to include automobiles and spare parts, electrical appliances, electronics, pharmaceuticals that rely on imported raw materials, food manufacturers using imported inputs, shipping, and aviation. Exporters and tourism businesses, meanwhile, could benefit from a weaker pound through stronger foreign currency earnings.
Businesses wait for a sustained currency trend
Manufacturers also played down the likelihood of immediate price increases, saying temporary exchange rate movements are unlikely to trigger changes in pricing strategies.
Hassan Mabrouk, deputy head of the Electrical Appliances Division, explained to Ahram Online that producers base prices on sustained currency trends rather than short-term fluctuations.
He said the sector would become more concerned if the dollar exceeded EGP 52 and remained above that level for an extended period, increasing the cost of imported production inputs. Air conditioners and refrigerators would be among the products most affected because of their relatively high imported component content.
Mabrouk also called on market regulators to closely monitor pricing practices to prevent unjustified increases linked to exchange rate movements.
Amr Hamed, head of the Foodstuffs Division at the Cairo Chamber of Commerce, told Ahram Online that any impact on food prices would be gradual rather than immediate, with import-dependent products likely to be affected first. The extent of any price increases, he added, will depend on how long the dollar remains elevated and on inventory levels held by manufacturers and traders.
Auto sector remains most exposed
Nour Darwish, deputy head of the Automotive Division, said the latest exchange rate movements have been influenced by global geopolitical developments, including renewed tensions between the United States and Iran, as well as changing investor sentiment toward emerging markets.
He noted that vehicle prices had declined when the dollar weakened earlier this year, but warned that a prolonged period above EGP 51 could prompt distributors and manufacturers to review prices.
Still, Darwish said it remains too early to anticipate broad price increases, arguing that businesses are watching whether the latest currency movements prove temporary or evolve into a sustained trend.
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